Proposed home loan limit could bring pain for buyers

Proposed home loan limit could bring pain for buyers

A mortgage broker says if the Reserve Bank was to limit home lending loans based on income it'd be a "kick in the guts" for first-home buyers.

The Reserve Bank has hinted at restrictions meaning the amount house hunters can borrow will be more strictly tied to income.

It's the sharp end of Auckland's housing crisis -- some people are so far from being able to buy a house they can't even afford to rent so they sleep in their cars.

Currently many house buyers borrow an estimate of about five times their income.

If banks are forced to restrict lending, as they do in the United Kingdom, it'd make a huge difference.

A person with an income of $85,000 and a 20 percent deposit can borrow around $550,000.

If banks could only loan four and a half times the amount a person earns, the house buyer could only borrow around $380,000 -- which would buy little or nothing in Auckland.

But economist Shamubeel Eaqub believes it's a good idea, saying it'd bring house prices down.

He says the bigger problem is playing catch-up with building infrastructure to support housing supply.

That includes the drainage, lighting, roads and sewerage that needs to go in before homes are built.

"The challenge for councillors is that they don't have funding to put the infrastructure in," Eaqub says.

Auckland's deputy mayor Penny Hulse says over the next decade the council needs to find $3 billion to fund infrastructure.

"If the Government stumped up with infrastructure money we could bring some of these developments forward. It's as simple as that."

The Government's response? Wait and see what's in the Budget.